Technology transfer, the process of bringing research and innovations developed within universities to the open market, is a “lottery business,” according to Benjamin Soffer, manager of T3, the commercialization arm of Technion, the Israel Institute of Technology in Haifa. “You never know which technology will actually make the difference,” he says, “so you try to buy as many tickets as possible.”

In a conversation with Israel Knowledge@Wharton, Soffer discussed T3’s philosophy for spinning off research into start-ups and new commercial products, the importance of involving seasoned entrepreneurs in the process and some of the organization’s recent success stories.

An edited transcript of the interview appears below.

Knowledge@Wharton: What is the mission of Technion Technology Transfer? Can you give a brief overview of your operations?

Benjamin Soffer: The Technion Technology Transfer is the tech transfer company of Technion [the Israel Institute of Technology]. Our role is to make sure that the innovations that are developed within the Technion find their way to the marketplace. In today’s day and age, you know, it’s very important for universities not just to do research, not just to do teaching, but to do technology transfer. At the Technion, we have come to realize that universities that are not able to impact the marketplace by creating jobs, by engaging the community and by building companies to some extent will become irrelevant.

Knowledge@Wharton: How does the technology transfer process at Technion work? How do you go about identifying research that has commercial potential? What are the stages of actually turning that research into a product or a service that people can access on the open market?

Soffer: The number one mission is to increase the level of openness of the institution to commercialization because you have to understand that, at the end of the day, people come to Technion — which is considered the MIT of Israel, certainly, if not the Middle East — to do cutting-edge research, and Technion is considered among the top ten universities in the world. First of all, you need to increase the level of openness of the researchers to commercialization. This is number one. Then, the question is how to bring the innovations that you produce to the marketplace. How do you increase awareness, and how do you create opportunities for these innovations to find their way to the marketplace?

Knowledge@Wharton: When you have several good ideas that could lead to commercial products, what process do you use to figure out which ones to focus on? How do you determine what steps need to be taken to get a product to market?

Soffer: You can tell a lot about a nation by looking at your cultural heroes. Let’s take a look at the United States: Who are the cultural heroes? Of course, you have Bill Gates and Steve Jobs … but you also have the Hollywood actors and politicians. In Israel, for many years, the cultural heroes, so to speak, were the generals — people like Moshe Dayan … and others. But in recent years, people like Gil Shwed [founder and CEO of Check Point Software Technologies, one of Israel’s biggest tech companies], people like Yossi Vardi [one of Israel’s first high-tech entrepreneurs] — the pioneers in the high tech industry — have certainly became the new culture heroes of Israel.

Many of them are graduates of the Technion. You may be surprised to learn that out of the 120 Israeli or Israeli-related companies on the NASDAQ, 70% of the CEOs or COOs are graduates of the Technion. Our main focus in order to commercialize the technologies is finding the right person to take that technology to the market. We have developed what we call EIR, the Entrepreneur in Residence program, whereby we try to marry a very strong entrepreneur with a very strong technology. We use these entrepreneurs as agents of the marketplace within the campus of the Technion.

Knowledge@Wharton: What has been the experience of having entrepreneurs working together with researchers? How have the two groups been able to learn from each other?

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Soffer: This is a very interesting dialogue because in academic settings, many of the innovations are technologies looking for a problem. But if you have the qualified, trained eye of a very strong entrepreneur, out of this dialogue some of the most brilliant things can come, and we have witnessed it time and again.

Knowledge@Wharton: Do you find that the entrepreneurs are learning from the researchers as well?

Soffer: Always. Absolutely.

Knowledge@Wharton: One of the best-known examples of tech transfer at the Technion has been the development of a treatment for Parkinson’s Disease called Azilect, which was developed based on research by professors Moussa Youdim and John Finberg in collaboration with Teva Pharmaceuticals. Could you take us through the process of getting this product to market?

Soffer: First maybe we should take a quick step back. In Israel, we have maybe four leading universities — the Technion, Hebrew University and Weizmann Institute of Science. All three leading universities in Israel — Technion, Hebrew University and the Weizmann — have at least one FDA approved drug in the market. And Technion belongs to this quite distinguished club of universities that were able to develop a drug and take it to the marketplace.

You have to remember that this process started about 20-25 years ago when funding from sources like the National Institutes of Health and others was more available. The research was done at the laboratory of professors Moussa Youdim and John Finberg, and later on, it was licensed in a pure, straightforward licensing deal, which, as opposed to deals that are done today, was about a four-page deal. And up until today, it has served us very well. Now, the drug was approved only five or six years ago by the FDA and was launched. This is, again, a good demonstration of how long it takes to develop a drug … in a university setting until it reaches the marketplace.

People don’t always realize that this is a very long and tedious process. So you ask why isn’t it happening, for example, through VCs and why was it directly licensed to a commercial company? I would tell you that this is the right process for drug developments. Between a university and the venture capital world, there is a synchronization problem because we operate in a window that could easily be 10-11-12 years long, and as we see here, even 20. While the VCs are operating in a much shorter window of five, six, seven years. And this gap has to be filled. The question is who will fill the gap? If it’s not the government, it has to be industry. Otherwise, all of this investment will be lost.

Knowledge@Wharton: Could you give us some other examples of research at the Technion that were successfully turned into commercial products? And could you discuss some of the different paths that have been taken to get a product to market?

Soffer: Although we are predominantly an engineering school, the Technion has made some major breakthroughs in medical devices…. One of the companies that we boast in that area is Mazor, which is in the business of spinal [surgery]. When you do a spinal surgery, the doctor [typically] drills right in through the spinal cord. What Mazor allows, using a robotic-aided surgery, is first to see and then to drill. This is a company by professor Moshe Shoham.

Another company, which we started with professor Rafael Beyar, called Corindus Vascular Robotics. Corindus is in the business of remote catheterization. I have a brother, who is a cardiologist at Mount Sinai in New York, and he walks a little bit stooped over because of the heavy lead suits that they need to wear while operating. Imagine for a minute that you sit in a remote location — it can be the adjacent room or it can be another continent — and using a joystick, you can direct the guide wire in the body of patients and do the procedure remotely. This is what is done by a company like Corindus.

Technion companies have raised just in the year 2012 close to $60 million. In the year 2011, it was, again, close to $50 million. In the last three years, they have raised close to $150 million, which in Israeli terms is quite significant. And this is a demonstration of the validation of the marketplace, of industry and the innovation that is coming out of the Technion.

Knowledge@Wharton: When talking about innovation, it seems that for every success, there are dozens of failures. And sometimes more can be learned from the failures than the successes. What have been some of the Technion’s most instructive failures?

Soffer: At the end of the day, what we have learned is that the level of risk at which we are talking is extremely, extremely high, because the level of unknowns on the technology level, on the marketing level, it is extremely high.

This is why in order to successfully launch an enterprise, a company, you need a very, very strong entrepreneur. We see starting a business as sending a spacecraft to space. The first ten minutes that you detach yourself from gravity consumes 80% to 90% of the energy, of the gasoline in this huge spacecraft, and you have to have the right person to inject that energy into the process, and this person is the entrepreneur.

Many think that because it’s a university and a high-risk technology that you can, so to speak, do well with a less experienced entrepreneur. But it’s right on the contrary. To commercialize a technology from a university, you need a very strong entrepreneur who can [communicate with] the marketplace and raise the necessary capital, but at the same time, talk at the eye level with a professor. So, if you ask me, “What is the number one lesson?” — it is to have a very, very strong team that knows how to work together.

Knowledge@Wharton: How does Technion Technology Transfer compare with other Israeli institutions, such as the Weizmann Institute? What about U.S. institutions like MIT, Stanford or even Wharton?

Soffer: This an excellent question because this is part of the metrics that we use to measure ourselves, to ask ourselves, “Are we successful?” First of all, let’s compare apples to apples. Take the research budget. The research budget of Technion is something like $70 million. The research budget of a university like MIT including Lincoln Lab is $1.4 billion. The research budget of Stanford is $700 million. If you just use the income metrics compared to the investment that you make in research, Technion is doing extremely well because we generate today close to $25 million directly from commercialization. This is either royalties, income, equity or dividend.

If you compare it to what MIT is doing, to another leading university, we are doing extremely well. But the point is … these are not the only metrics that you should use. For us, the income certainly is critical, but you need to see the economic development that is done around the Technion. In a city like Haifa, how many companies have established their presence surrounding the Technion in order to tap into the human capital and the resources available here? Companies like Google, Phillips and Microsoft all have and are operating significant R&D centers a ten-minute drive from the Technion campus.

Knowledge@Wharton: So, it’s not only about dollars directly generated but also about the domino effect that is created?

Soffer: You are absolutely right. Again, the issue is not to maximize every deal that we do. We do not try to extract the most economic value from the deals that we do, but we try to do as many deals as possible. In a way, we view technology transfer as a lottery business because honestly, you never really know which technology will actually make the difference, be the paradigm shift. So you try to buy as many tickets as possible.

If you ask me, “What is the philosophy that makes T3, my unit, unique?” It’s that we have adopted a philosophy that if Technion is a huge harbor, we are the tug boat. Our role is to make sure that the research done at Technion will find its way out of the port of Technion as quickly and as effectively as possible. We are not a gateway. And this is something that is changing, and I think it’s very important for the industry to understand.

Knowledge@Wharton: What are some of your top priorities for 2013 and beyond?

Soffer: We are putting a huge emphasis now on stem cells. Just a couple of months ago, we started a drug development and screening company … within AMIT [the Alfred Mann Institute at the Technion], which is an internal incubator that we started with the help of Alfred Mann, a very prominent and a successful businessman here in the United States, that has started many companies…. We all realize now that the [system of] drug development and drug screening is broken, so what [what we] are doing — at the end of the day, the company will help do clinical trials on a chip, as opposed to the way clinical trials are done today. It’s a stem cell company, developing the pick and shovels of the industry, of stem cell research and stem cell development.